Nifty Bank rises nearly 2% days ahead of RBI MPC meet; HDFC Bank, IndusInd stocks rise up to 3.5%

RBI

The Nifty Bank index jumped nearly 2 percent to hover near the 50,100-mark on February 4 as bank stocks recorded strong gains. The massive move comes as market experts eagerly await the outcome of the Reserve Bank of India’s Monetary Policy Committee meeting.

IndusInd Bank shares were the top gainer on the index, rising as much as 3.25 percent to trade at Rs 1,046 apiece. The stock saw heavy trading volumes, two times higher than its 10-day average volume. Nearly 86 lakh shares were involved in active trade, as seen at 2.47 pm.

Kotak Mahindra Bank shares followed, trading nearly 3 percent higher at Rs 1,933 apiece. This stock too saw high volumes, 1.27 times higher than its 10-day average.

The other bank stocks which recorded strong gains included State Bank of India (up 2.48 percent), Axis Bank (up 2.46 percent), Canara Bank (up 2.45 percent) and HDFC Bank (up 2.43 percent).

Shares of IDFC First Bank and AU Small Finance Bank, however, were trading in red. IDFC First Bank shares were trading 0.34 percent lower, which those of AU Small Finance Bank were down 1.53 percent.

The RBI has kept its repo rate unchanged at 6.5 percent for the 11th time till its December MPC meeting. This came after the central bank increased it by 250 bps between May 2022 and February 2023.

Market experts believe that the upcoming MPC meet, which is set to be the first under RBI's new Governor Sanjay Malhotra, will cut the benchmark lending rate by 25 basis points (bps) from 6.5 percent to 6.25 percent. Economists and market experts told Moneycontrol that India could see its benchmark rate falling by 50 - 75 bps in 2025. Following a likely cut in the upcoming February MPC, there could be another 25 - 50 bps cut spread.

A fall in RBI's repo rate is likely to be considered a positive for the bank stocks. Market experts will actively keep a watch on the bank stocks as MPC announces its decision on repo rate on February 7.